New York’s Climate Change Act Raises Constitutional Questions

New York recently enacted the Climate Change Superfund Act to recoup climate related costs allegedly suffered by the state. The act’s sweeping financial obligations and its retroactive assignment of liability have raised significant concerns and provoked litigation.

Loosely modeled after the federal Comprehensive Environmental Response, Compensation, and Liability Act, the New York law mandates that fossil fuel companies contribute to a fund dedicated to infrastructure projects in the Empire State.

Certain “Responsible Parties” will be held responsible for contributing over 25 years or $3 billion annually to the Climate Change Adaptation Fund, with those dollars being used to fund climate resilience, infrastructure repairs, and environmental restoration.

The state law defines “responsible parties” as entities that engaged in the trade or business of extracting fossil fuel or refining crude oil between Jan. 1, 2000, and Dec. 31, 2018, that the state deems responsible for more than one billion metric tons of greenhouse gas emissions.

Being “engaged in the trade or business of extracting fossil fuel or refining crude oil” in New York requires an analysis of various state laws and regulations. New York’s energy law provides:

• Fossil fuel shall mean coal, petroleum products, and fuel gases.
• Petroleum products shall include all products refined or re-refined from synthetic or crude oil or oil extracted from other sources, including natural gas liquids.
• Fuel gases shall include but not be limited to methane, natural gas, liquefied natural gas, and manufactured fuel gases.

While New York case law doesn’t provide an explicit definition of petroleum refining, state regulations define petroleum refining to include producing gasoline, aromatics, kerosene, asphalt or any other products through the distillation of petroleum and redistillation.

This broad definition suggests that the state could hold any entity involved in the value chain of crude oil, synthetic fuels, or fossil fuels accountable under the act. Including various refining techniques expands the scope beyond traditional oil refineries to include businesses engaged in secondary refining and some petrochemical operations.

The Climate Change Superfund Act is only the second of its kind enacted to adopt a draconian superfund model to impose strict liability attributable to climate change. The first was Vermont’s Climate Superfund Act, enacted last July. While both the New York and Vermont Acts impose strict liability on fossil fuel companies for historical emissions, the New York Act further specifies a collective contribution amount, whereas the Vermont Act doesn’t specify a total fund amount.

Similar climate superfund proposals were introduced in California, Massachusetts, and Maryland each aiming to hold companies financially accountable for historical GHG emissions. These proposals mirror the Climate Superfund Act and Vermont Act, targeting entities responsible for over one billion metric tons of greenhouse gas emissions within prescribed time frames. However, the California, Massachusetts, and Maryland bills failed to gain the necessary support from their respective state legislators.

Both the Vermont and New York laws are facing legal challenges. In Chamber of Com. of the U.S. v. Moore, the complaint claims that the Vermont Act exceeds state authority and violates federal law and constitutional principles. The plaintiffs allege the Vermont Act is unconstitutional because it’s preempted by the federal Clean Air Act and conflicts with federal laws regulating greenhouse gas emissions.

Plaintiffs further argue the Vermont Act violates the US Constitution’s Commerce Clause by unfairly targeting companies operating across state lines, the Due Process Clause by imposing retroactive liability for historical emissions, the Eighth Amendment by constituting excessive financial penalties, and the Fifth Amendment because enforcing the law would result in an unconstitutional taking of private property.

In West Virginia v. James, New York Climate Superfund Act is facing a similar challenge. The plaintiffs include a coalition of 22 states, the West Virginia Coal Association, the Gas and Oil Association of West Virginia, the America’s Coal Associations, and Alpha Metallurgical Resources. Here, the plaintiffs argue the Climate Superfund Act overreaches in multiple ways.

The New York plaintiffs further allege the Climate Change Superfund Act violates the Equal Protection Clause of the Fourteenth Amendment by unfairly singling out the oil and gas industry—even though New York doesn’t produce these resources in-state—effectively imposing financial burdens on retroactively and legally operated out-of-state businesses.

The New York law imposes retroactive liability on companies for historical and previously lawful emissions and raises meaningful constitutional questions, including potential violations of the Commerce Clause, the Due Process Clause, and federal preemption under the Clean Air Act. The outcome of these challenges will have far-reaching implications—not only for the energy industry but also weighing the balance of regulating environmental and climate issues between state and federal governments.

If the Vermont Act or the New York Climate Change Superfund Act are found unconstitutional, then the limits of state authority to retroactively impose strict liability for historical greenhouse gas emissions will be reinforced and likely discourage other states from pursuing similar legislation.

If upheld, the Vermont and New York laws could encourage other states to enact similar legislation, expose the conventional energy industry to additional costs for historical interstate operations, disrupt interstate commerce, and introduce economic and regulatory uncertainty.

As these cases progress, they will play a pivotal role in defining the scope of retroactive state power to address climate change.

This article does not necessarily reflect the opinion of Bloomberg Industry Group, Inc., the publisher of Bloomberg Law and Bloomberg Tax, or its owners.

Author Information

Stephen Fitzgerald is partner in Paul Hastings’ environmental litigation practice.

Brian Israel is co-chair of the environmental litigation practice at Paul Hastings.

Richala Jackson is an associate in the corporate department at Paul Hastings.

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